28/02/2022, 19:48 India’s household expenses may shoot up due to Russia-Ukraine war; companies watching input costs - The
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India’s household expenses may shoot up due to
Russia-Ukraine war; companies watching input costs
Consumer product companies, not refuting a possibility of further price hike, said that
they are keeping a close watch on the input costs on the back of the Russia-Ukraine war.
Experts maintained that the crisis will escalate consumer inflation further.
Written by Tanya Krishna
February 28, 2022 5:36:51 pm
https://www.financialexpress.com/industry/indias-household-expenses-may-shoot-up-due-to-russia-ukraine-war-companies-watching-input-costs/2447032/ 1/14
28/02/2022, 19:48 India’s household expenses may shoot up due to Russia-Ukraine war; companies watching input costs - The Financial Express
Consumer goods companies keeping a close watch on the input costs on the back of the Russia-Ukraine war.
Image: Bloomberg
Russia-Ukraine war will impact household expenses ‘hugely’ in India, with many
consumer product companies not ruling out the possibility of further price
hikes, as costlier crude oil has a cascading effect on consumer goods. Several
companies said that they will wait and observe the situation created by this
global crisis for any escalation over the short term. Panasonic said it is well
prepared. “There are no immediate plans to announce any further hike in prices,
but we are watching input costs closely for any escalation over the short-term,”
Manish Sharma, CEO, Panasonic India & SA, told FinancialExpress.com.
What will get costlier as Russian supplies stop?
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28/02/2022, 19:48 India’s household expenses may shoot up due to Russia-Ukraine war; companies watching input costs - The Financial Express
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“Mineral fuels & oils, natural or cultured pearls and precious stones, fertilizers,
machinery, nuclear reactors and its parts are the main categories India is
importing from Russia. Its share of total imports from Russia is almost 50 per
cent. These categories may see a price hike of 4-6 per cent as India will have to
import from other countries at a higher price. Similarly, India imports
agriculture products, vegetable fats and oils, metallurgical products, plastics
and polymers from Ukraine. However, not much impact on price will be seen in
these categories,” Azaz Motiwala, Founder at IKON Marketing Consultants, told
FinancialExpress.com.
High crude oil prices to make food, other stuff more expensive
Russia-Ukraine war has already stoked the price of crude which is now above
$100 a barrel; this will directly or indirectly impact almost all consumer facing
products. India imports nearly 80 per cent of its oil needs and this price hike is
directing the country towards a risk of inflation. According to the Reserve Bank
of India’s analysis, every $10 rise in crude prices adds about 0.5 per cent to
inflation. “As oil prices rise, we may see an increase in inflation in India and this
can make staple items such as vegetables, fruits, pulses, oil etc a bit expensive,”
Azaz Motiwala added.
Krishnarao Buddha, Senior Category Head, Parle Products, said, “There is no
stopping the rise in input costs. Going forward, with how the price of crude oil is
going due Russia’s attack on Ukraine, and with markets crashing, etc., it will
definitely have an impact on food because at the end, its all about prices of oil
https://www.financialexpress.com/industry/indias-household-expenses-may-shoot-up-due-to-russia-ukraine-war-companies-watching-input-costs/2447032/ 3/14
28/02/2022, 19:48 India’s household expenses may shoot up due to Russia-Ukraine war; companies watching input costs - The Financial Express
and gas. This increase in price will ultimately have a huge bearing on input
prices and accordingly, all manufacturers and plants will be subject to further
price increases and that might have some bearing on the overall demand as
well.”
Saugata Gupta, MD and CEO, Marico Limited, said, “The evolving geo-political
scenario can flare up the prices of crude oil and other commodities further
which will have a cascading impact on raw materials and packing materials.
Organisations will have to gear up and take measures to absorb some of the
cost through aggressive optimisation initiatives and perhaps pass on some of
the pressure to consumers in a calibrated manner.”
Dabur too is looking at a ‘calibrated price increase’ in case of a rise in input cost.
“We are closely watching the situation now, and will have to take another round
of calibrated price increases in case the inflationary pressures continue
unabated,” Mohit Malhotra, CEO, Dabur India Ltd, said. There is already
continued inflation in hydrocarbon derivatives, paper-based packing material,
raw honey, edible oils and some key spices that we use, he added.
‘Imported inflation’: How much will raw material costs rise?
“Owing to the current global scenario of the ongoing tensions between
countries, this phenomenon is expected to continue in the coming quarters as
well. We further expect the input price to increase by 3-5 per cent on an average
across categories. Moreover, if the current global tension continues, there is a
possibility that the raw material and other input costs might further increase,
translating into higher prices of consumer goods across industries,” said Rakesh
Kaul, CEO and Whole Time Director, Somany Home Innovation Limited.
“The Russia-Ukraine war has its first casualty impact on the price of crude.
Crude is already at $100. As this price increase gallops with every incursion,
diesel and petrol prices shoot up all over. The daily adjustment model of pricing
fuel will make sure that consumers prices for fuel shoot up madly. Expect
anything between 12-20 per cent, in a worst case scenario. This means that
every consumer pays more to travel, for every cake of soap, toothpaste and
https://www.financialexpress.com/industry/indias-household-expenses-may-shoot-up-due-to-russia-ukraine-war-companies-watching-input-costs/2447032/ 4/14
28/02/2022, 19:48 India’s household expenses may shoot up due to Russia-Ukraine war; companies watching input costs - The Financial Express
vegetable and fruit, etc. Expect consumer prices of goods and services to rise
and expect the bite to be deep. This is really “imported inflation due to war”,
business and brand-strategy expert Harish Bijoor told FinancialExpress.com.
However, Ashish Khandelwal, MD, BL Agro, said that the crisis will not have a
major impact on India and inflation rate in the country. “It will not have a
significant impact on India. There might be a slight increase in the price of
sunflower oil since we import the sunflower from Ukraine but since there is no
major consumption of it in India, it won’t matter much. In terms of crude oil as
well, there might be a further price rise of lets say, 5 per cent.”
Oil, food inflation to hit India hardest in Asia
ICICI Securities recently said that the higher crude oil prices resulting from
Russia-Ukraine conflict will keep CPI inflation higher for longer, obliging the RBI
to raise rates more than the two hikes that were expected in Aug-Dec’22 since
transport forms about a fifth of CPI basket for an average consumer. A report by
Nomura Holdings said that the geopolitical tensions are likely to further
aggravate inflationary pressures with sustained rise in oil and food prices to
have an adverse impact on Asia’s economies. It also said that in Asia, India is
likely to be among the worst losers as a result of this conflict.
Russia accounts for 11 per cent of global crude-oil exports. If sanctions take
about 60 per cent of this off global markets (with China, Belarus, and a few
other customers possibly defying the sanctions), world crude-oil supply would
decline by 3mmbd, and the Brent crude price would likely shoot above $110/bbl,
ICICI Securities said.
Prolonged period of instability
Meanwhile, global forecasting and quantitative analysis company Oxford
Economics moved its global baseline to full-scale invasion scenario, which
assumes a prolonged period of instability. Priyanka Kishore, Head of India and
South East Asia, Macro and Investor Services at Oxford Economics, maintained
that this should shave off 0.2 ppt from global GDP growth in 2022 and 0.1 ppt in
2023. This means higher European gas, oil and food prices, and more financial
https://www.financialexpress.com/industry/indias-household-expenses-may-shoot-up-due-to-russia-ukraine-war-companies-watching-input-costs/2447032/ 5/14
28/02/2022, 19:48 India’s household expenses may shoot up due to Russia-Ukraine war; companies watching input costs - The Financial Express
market disruption. Furthermore, it said that Asia will not remain unscathed and
despite limited trade and investment linkages with Russia, the region will feel
the impact via higher energy prices and some other commodities.
MORE STORIES ON INFLATION RUSSIA UKRAINE CONFLICT
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